[wtracy]

<<Capitalism is a greedy optimizer. When it finds a local maximum it goes all in. It does not explore the fitness landscape.>>

Upvoted specifically for this line. That strikes me as a key insight into the free market's strengths and weaknesses.

[api]

I've thought this for a long time. Ultimately I think it's that private enterprises must have a low appetite for risk. The only time you see private enterprises investing in fundamental R&D or otherwise really exploring, it's when they are either so huge that they have immense cash hoards (e.g. Google) or they are monopolies with guaranteed cash cow income streams (e.g. the old Bell Labs). The vast majority of private enterprises cannot risk investing in anything without a very high probability of return, and that means being conservative and doing things that have already been proven to work. (Or that are only a slight deviation from things that work, or that build on already proven tech, etc.)

Governments have immense disadvantages too. They are slow and inefficient and are absolutely horrible at taking things the "last mile" from lab prototype to product. Governments flat out suck at "shipping." Yet they have the ultimate guaranteed income stream -- taxes -- and so can afford to invest in "high risk, high payoff" R&D and basic science that might never produce direct payoff (but may produce large indirect payoffs later).

The optimum seems to be, as with many things in nature, a balance. There may also be third options that have yet to be discovered, such as innovations in finance that enable risk to be spread more intelligently.